All Topics / Creative Investing / MOVING OUT! Rent or Wrap?
Hi all,
I have received advice to move out of primary residence to take advantage of negative gearing benefits by converting the property from owner occupier to investment. I have been advised to rent to do so. I was wondering whether to complete a wrap myself for the same budget (say $600 per week) rather than rent. The rental income from my premises will pay for my vendor finance arrangement. Is this a good idea?
Hi Adam
It's certainly doable and you could 'buy' using either a vendor finance Instalment Contract (previously called a wrap) or a Rent To Own (Lease with an Option),
The challenge is that buying a property that's being offered by a vendor financier, with vendor finance attached, usually means you'll be paying a premium price. This is because a vendor financier's target market is normally a buyer who can't get traditional finance.
You could reconcile yourself to paying this premium price or you could spend some time learning about real estate vendor financing and, as a result of this new knowledge, learn how to buy properties, directly from sellers, with vendor finance.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi,
With installment contracts, i have read that the title remains wit hthe seller until the property is fully paid off after the term. Can this cause a problem if the buyer intends to rent out the property as an investment?
Hi Aatt
That depends on the vendor, i.e. the vendor selling the property with an Instalment Contract (IC). Some will only sell to owner occupiers and others will allow an IC purchaser to rent but only under certain conditions/restrictions
The concern in the mind of a vendor financier is often that 'control' of the property is starting to move too far away from them. This, in my experience, would be the concern you should address if you plan on putting such a proposal to a vendor financier.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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